All Forum Posts by: Christian Hutchinson

 @Paul S

"I mean its not sexy, but thats an easy win on the low-end of the scale, and a couple buckets of paint.

People who are local know the play...but like all investments proceed at your own risk."

I can appreciate your analysis.  Hence why I said what I said. I have things I do to a property, that raises the tenant pool a little bit.  Lighting, and security systems(Cameras which I can remote monitor).  I'm local and self-manage.  Yes, the risk tolerance is higher being local. Its all high-risks.  But I view it I'll be ever present at a property.  I mean Detroit tenants are bold, but I've haven't had the 'steal on camera' bold happen. If a tenant decides to cut the security wires (thats inside of steel tubes) cut the dusk to dawn lighting wires (inside steel tubes) so that way they can walk off with appliances, and I have their name, cellphone number, driver's license, SSN, and place of employment.  They are a determined criminal.   Frankly, someone with that mindset would fail the screening.

If someone does all that to get the appliances they better hope they leave no evidence and they beat the cloud backup, because they literally would be caught.  lets be honest most criminals are extremely lazy.  I do my setups that makes them have to try.  Oh and they have to do all that with another tenant in the property.  So that means the tenant has to side with person stealing their washer and dryer.

You are worried about the wrong thing, when you are playing at the end of the market you are...

You want to minimize risk (theft), and generate cash.  If they want $50K offer $40K, spend $12-15K get the property together.  2 bed rents for $800/mo thats $1600 for two units on a cake walk.  Which means you are putting $1100/mo in your pocket every month.  Thats $13K a year in your pocket.  Then you cash out the stabilized asset in 3-4 years for $80K-$90K because there is enough meat on the bone for a turnkey investor. If values improve great borrow against the asset.

The methodology you are attempting to apply you will struggle finding a deal. Not to mention, banks are not kind in Detroit regarding appraisals.

Attempting to create capital via debt is a tough strategy in Metro Detroit. its hard in Detroit. Its even harder on the low end of the market. All these courses and blogs talk BRRRR and do in in under 6 months. It just doesn't happen that way in reality. Maybe 18-24 months. For instance last year from March to October lending was effectively shutdown for the types of properties you are talking about

The only way for you to make money on a purchase is buying a distressed asset or purchasing from a buyer who has little to no knowledge of market conditions.

You want a property, where you throw some paint on the wall, put in some stock Home Depot Cabinets, replace a HWT or Furnace and start renting.  Esp on your first go around.  This platform is littered with people who believed they could do this textbook play.  it can be done, but extend your horizon to two years for the cashout.  This region doesn't appreciate like that historically.

Here I'm feeling nice today, and I'm gonna give a newbie from out of state an easy win.

https://www.realtor.com/reales...

I mean its not sexy, but thats an easy win on the low-end of the scale, and a couple buckets of paint.

People who are local know the play...but like all investments proceed at your own risk.

I purchased an investment property on LC/Owner Financing.  I have secured long-term financing.  How is it determined what the payout is? I pay the seller monthly.  Do we just use an amortization schedule?

Or is this a chance to negotiate an exit price (wishful thinking).

Reading the LC it looks like a standard loan agreement with interest.

Good Luck, house hacking is a great way to start.

Be willing to take risk, and know how the market is developing around you. Also, delayed satisfaction for future gain.

I met Halle Berry and she hugged me one-time too. Doesn't mean I can do it again, or something similar for a sustainable operation.  How much time have you spent to get one deal.  How long until the next one?

In a world where you can flat fee list a property for $450 and get it on the MLS or on Craiglists the pool of people needing these services are just extremely small. I get wholesalers calling me everyday. This is how the conversation always goes:

I want to buy 123 Main Street, and I can close with cash very quickly.  (Mind its not for sale, but hey lets see what you got to say.)

I say 'what you want to offer'? Mind I know the value of all my properties. There are numerous websites to tell yo so. I have alerts setup through redfin and zillow. They send you stuff simply by claiming a property on their website. Its not an appraisal, or CMA, etc. but lets be real it gets you in the ballpark, and in stable neighborhoods with 2-3 dozen sales in the last 12 months, the values are nearly dead-on.

If zillow and redfin are telling me the property is worth $75K and you offer $30K. How and why are you gonna get me to that number. Okay, I know it needs a new roof, or maybe it needs a foundation work, so zillow and redfin don't know about that. But still you are calling me unsolicited. I could honestly use a FSBO and sell it for $50K and just say 'as-is' and say it needs a new roof and foundation work, I still would walk with $10K-20K more than using a wholesaler.

Now if you have access to the 'faucet' meaning a city or bank gave you access to some properties and you are going to find end-buyers I get that.

The model just doesn't hold up. They say there are successful wholesalers out here. But when you hear what all it involves literally it seems easier to get your license.

Also, its arbitrage, which typically work on low margins.  I get someone bringing me a deal and taking $2-3K cut of the deal, but these wholesalers want 20K-30K, when thats honestly lots of the margin in an investment.

Wholesalers are right up there with Private Equity Firms...I don't understand their place in the marketplace.

The concept of maximizing profit on owners ignorant of their asset is gross. I find it gross and you are talking to someone who bought a house out of probate because some lady with 4 kids went to the doctor sick, found out she had Stage 4 cancer and died less than 90 days later.  Her kids were put into foster care, the house wasn't winterized and the pipes burst in the house.  I bought the house out of probate. The kids write letters to the tenants in the house telling them how much they miss living there.

I deal with that...and I still find wholesaling gross.

Wholesaling is get rich quick scheme pushed by lots of gurus.  Its ways for people with no money, license, etc to get started.

To me, it makes no sense, most investors always are searching for deals online.  Unless you get an off-mafket listing any investor would simply call the listing agent and save the markup.

The idea I list a property for X the Wholesaler gets an assignable contract charges X+20K to sell to an end-buyer is a joke. I sold a throw away property for in January for $15K a Wholesaler wanted to get a purchase contract because they had an end buyer. I told them I give them a 30 day contract but I wanted a $2K non-refundable fee EMD. Which they balked at. I said if you have a buyer and you plan to sell the property for $40K you won't put up $2K to make $20K in 30 days? Either you don't have the $2K or you don't have a 'buyer' lists.

Im a terrible person it was basically a 30 minute phone call of me bullying them and calling them on their BS.  Seriously with the time spent, you could just get your license.   

We got in front of non-paying tenant situation by discounting everyone's rent 20% from April until about October...Then we have one tenant who is on discount as of Feb, but their lease is up in June.  So they may have to go.

The lesson in all this, caluclators and these crazy Risk Modeling equations are good.

But sometimes some things dont require advanced math.  Leveraging your property to take on debt versus free and clear needs to be looked at at a case on case basis. Before this all started I had someone telling me I was mismanaging my portfolio because of the untapped equity versus the debt owed.  Well, I could discount rents and didn't need a forbearance from a lender. We are going to emerge stronger out of all this. 

So here is my assessment and experience.

The market value of the property meaning what it will sell for not what the bank will appraise it runs like this:

Some baseline number that it costs to get into an area. Then the total costs of what it takes to bring it to livable condition or rentable condition. Then tack on 25%

So say you bought a property in East Village for $70K. To rehab the property is $60K So that is $130K.  You can sell it on the open market for $162K.

How do you establish a 'baseline'? Well check the prices of Land, Shell Houses, Homes requiring work, and Homes that are in good condition. 

Go to the selected neighborhood via Zillow, and look to see what the condition is via the picture, compare the price.  Then cross-reference sales in the Detroit Land Bank.  To determine the cost of rehab look what the Land Bank says and the scope of work and determine your scope and costs.

I look at $/sq ft of the property at purchase, and for rent, then median household income of the census tract.

Every property is good deal if there is a market to rent to.